French Cable Giant Numericable Eyeing IPO (Report)

Analysts say the move could be a prelude to a combination with Vivendi's telecom arm SFR amid rising French and U.S. cable industry deal chatter.

One of France's largest cable operators, Numericable, is planning to go public later this year, according to French business news network BFM TV.

Analysts said Monday that an IPO could be a prelude to a combination with Vivendi's French telecom arm SFR.

Similarly to the U.S. where Wall Street has been discussing various potential cable deals in recent months, deal talk in France has been heating up with a focus on Numericable, which has 1.6 million pay TV subscribers.

Industry observers have long said that SFR and Numericable would make a good fit. But Vivendi's ownership of pay TV powerhouse Canal Plus has so far been seen as a regulatory hurdle. Vivendi, however, is currently working on splitting SFR from its other assets - Universal Music Group, Canal Plus and Brazilian broadband firm GVT.

A Numericable IPO "would facilitate a merger with SFR," said Liberum Capital analyst Ian Whittaker. "One of the strategic reasons for Vivendi's planned de-merger of its SFR French telco business from the media assets was that a spin-off would facilitate a merger between SFR and Numericable, especially if the latter comes to market, as there would no longer be the issue of Vivendi’s control of leading French pay TV operator Canal Plus blocking a deal."

Numericable is owned by private equity firms Carlyle, Cinven and Altice, as well as Numericable management. Bankers are considering a valuation of $8 billion (€6 billion), according to the IPO report.

"A merger between Numericable and SFR would have significant benefits," Whittaker said. "It should generate substantial cost synergies, SFR would be able to benefit from Numericable’s urban weighting, and there could be revenue upside for both entities through the enhanced ability to offer more consolidated services."

The analyst on Monday reiterated his "buy" rating on Vivendi and $30.71 (€23) stock price target.
UBS analyst Polo Tang said in a report about Vivendi on Monday: "Hopes of an SFR/Numericable deal could be positive for sentiment...But we remain concerned about another leg down in SFR estimates."

Vivendi's stock was up slightly in late Monday morning trading.

Twitter: @georgszalai